Question 1

On September 1,Peterson Maintenance Company contracted to provide monthly maintenance services for the next six months at a rate of $2,000 per month.The client paid Peterson $12,000 on September 1.Assuming Peterson records deferred revenues using the alternative treatment,what would be the entry on September 1?

Accepted Answer

A) Debit Cash and credit Unearned Revenue for $12,000 
B) No entry is needed until the services are performed 
C) Debit Cash and credit Service Revenue for $12,000 
D) Debit Prepaid Maintenance and credit Cash for $12,000

Question 2

At the end of the current year,the accountant for Colorful Graphics forgot to make an adjusting entry to accrue Wages Payable to the company's employees for the last week in December.The wages will be paid to the employees in January.Which of the following is an effect of this error?

Accepted Answer

A) Net income is overstated. 
B) Liabilities are overstated. 
C) Net income is understated. 
D) Expenses are overstated.

Question 3

The asset account,Office Supplies,had a beginning balance of $3,900.During the accounting period,office supplies were purchased,on account,for $2,600.Supplies Expense for the accounting period is $4,500.What is the ending balance of Office Supplies?

Accepted Answer

A) $6,500 
B) $2,000 
C) $4,500 
D) $5,800

Question 4

Which of the following is considered a fiscal year?

Accepted Answer

A) six months 
B) three months 
C) twelve months 
D) four months

Question 5

On July 1,Omega Company paid rent of $15,000 for a small equipment storage area from July 1 until December 31.Provide the adjusting journal entry on July 31.(Ignore explanation. )Assume the deferred expense is initially recorded as an asset.

Accepted Answer

The answer of On July 1,Omega Company paid rent of...

Question 6

The sum of all the depreciation expense recorded to date for a depreciable asset is called ________.

Accepted Answer

A) book value 
B) residual value 
C) depreciation expense 
D) accumulated depreciation

Question 7

Argyle Designs has entered into a contract to design 10 new dresses for a customer.It will collect a total of $49,000 after the design services are complete.Argyle started design work on June 1.As of June 30,it finished 2 of the 10 designs.The company will make an adjusting entry at the end of June to accrue $12,250 of service revenue.

Accepted Answer

A) True 
 B)False

Question 8

The entry to record depreciation includes a debit to the ________.

Accepted Answer

A) Equipment account 
B) Cash account 
C) Accumulated Depreciation account 
D) Depreciation Expense account

Question 9

What is the term used for the difference between the Equipment account and the Accumulated Depreciation account?

Accepted Answer

A) contra asset 
B) market value 
C) historical cost 
D) book value

Question 10

On the first day of January,Harris Company borrowed $3,000 on a one-year note payable bearing interest at 5% per year.The note specifies that principal and interest must be paid in full at the end of the one-year period.On June 30,the adjusted trial balance will show Interest Payable of ________.

Accepted Answer

A) $75 credit 
B) $75 debit 
C) $150 credit 
D) $150 debit

Question 11

Kittery Services purchased computers that are to be used in its consultancy services.Based on the matching principle,the related account that should appear on the income statement for the year ended December 31,2016 is ________.

Accepted Answer

A) Depreciation Expense 
B) Service Revenue 
C) Accumulated Depreciation 
D) Equipment Expense

Question 12

Pluto Promotions sells tickets in advance for its weekly productions and records the proceeds as Unearned Revenue.At the end of each month,the company makes an adjusting entry to account for the tickets used during the month (ticket revenue. )On March 1,the Unearned Revenue account had a credit balance of $2,000.During March,it sold 300 tickets at $30 each,and 250 tickets were used during the month.What is the balance in Unearned Revenue at the end of March?

Accepted Answer

A) credit balance of $3,500 
B) debit balance of $2,000 
C) credit balance of $2,000 
D) debit balance of $3,500

Question 13

If a company fails to make an adjusting entry for deferred expense,the assets will be overstated.Assume the deferred expense is initially recorded as an asset.

Accepted Answer

A) True 
 B)False

Question 14

On March 1,2016,Norton Company paid $60,000 as office rent covering the three-month period ending May 31,2016.Journalize the entry on March 1 by using the alternative treatment of deferred expenses.

Accepted Answer

The answer of On March 1,2016,Norton Company paid $60,000 as...

Question 15

Paramount Event Planning Services collects fees from its customers in advance.On January 1,2017,the balance of its Unearned Revenue account was $6,000 (CR).During January and February,the company collected $3,000 and $800 as advance fees.During the two-month period,it performed services of $7,500 related to the deferred revenue.What is the balance in Unearned Revenue at the end of February?

Accepted Answer

A) debit balance of $6,000 
B) credit balance of $6,000 
C) debit balance of $2,300 
D) credit balance of $2,300

Question 16

Sierra Event Planning Services records deferred expenses and deferred revenues using alternative treatments.It makes adjusting entries as needed to bring its books to the full accrual basis once a year at the end of the year.On December 15,it collected $4,000 from a customer in advance for a series of events that will start late December and end in March.At the end of the year,it had performed approximately 10% of the services for its customer.The adjusting entry on December 31 will include a debit to Service Revenue for $3,600.

Accepted Answer

A) True 
 B)False

Question 17

The advance cash receipts of future revenues are called ________.

Accepted Answer

A) accrued revenues 
B) deferred expenses 
C) deferred revenues 
D) accrued expenses

Question 18

The depreciation method that allocates an equal amount of depreciation each year is called the straight-line method.

Accepted Answer

A) True 
 B)False

Question 19

What type of account is Prepaid Rent,and what is its normal balance?

Accepted Answer

A) It is an expense account and has a debit balance. 
B) It is a liability account and has a credit balance. 
C) It is a revenue account and has a credit balance. 
D) It is an asset account and has a debit balance.

Question 20

On January 1,Ogden Company had $1,500 of supplies on hand.During January,Ogden purchased $5,500 worth of new supplies.At the end of the month,a count revealed $600 worth of supplies remaining on the shelves.The adjusting entry needed will include a debit to Supplies Expense of $6,400.The supplies were initially recorded as an asset.

Accepted Answer

A) True 
 B)False

Exam 3: The Adjusting Process

At the end of the current year,the accountant for Colorful Graphics forgot to make an adjusting entry to accrue Wages Payable to the company's employees for the last week in December.The wages will be paid to the employees in January.Which of the following is an effect of this error?

The asset account,Office Supplies,had a beginning balance of $3,900.During the accounting period,office supplies were purchased,on account,for $2,600.Supplies Expense for the accounting period is $4,500.What is the ending balance of Office Supplies?

Which of the following is considered a fiscal year?

On July 1,Omega Company paid rent of $15,000 for a small equipment storage area from July 1 until December 31.Provide the adjusting journal entry on July 31.(Ignore explanation. )Assume the deferred expense is initially recorded as an asset.

The sum of all the depreciation expense recorded to date for a depreciable asset is called ________.

The entry to record depreciation includes a debit to the ________.

What is the term used for the difference between the Equipment account and the Accumulated Depreciation account?

On the first day of January,Harris Company borrowed $3,000 on a one-year note payable bearing interest at 5% per year.The note specifies that principal and interest must be paid in full at the end of the one-year period.On June 30,the adjusted trial balance will show Interest Payable of ________.

Kittery Services purchased computers that are to be used in its consultancy services.Based on the matching principle,the related account that should appear on the income statement for the year ended December 31,2016 is ________.

If a company fails to make an adjusting entry for deferred expense,the assets will be overstated.Assume the deferred expense is initially recorded as an asset.

On March 1,2016,Norton Company paid $60,000 as office rent covering the three-month period ending May 31,2016.Journalize the entry on March 1 by using the alternative treatment of deferred expenses.

The advance cash receipts of future revenues are called ________.

The depreciation method that allocates an equal amount of depreciation each year is called the straight-line method.

What type of account is Prepaid Rent,and what is its normal balance?